Chapter 4 5 6 7 D2 Flashcards
What is one advantage of selling wine directly to retailers?
Higher Profit Margins
Avoids costs and markups added by intermediaries.
What is a disadvantage of selling wine directly to retailers?
Increased Administrative Burden
Producers must handle logistics, compliance, and invoicing.
What role does a distributor play in wine distribution?
A distributor buys wine from producers and sells it to various retailers and hospitality businesses.
What is a key advantage of appointing a distributor?
Market Expertise
Distributors have established relationships with retailers and knowledge of consumer preferences.
What is a disadvantage of using a distributor?
Lower Profit Margins
Distributors take a percentage of sales, reducing the producer’s profits.
What is a potential benefit of establishing a joint venture?
Shared Resources and Costs
Helps reduce financial risk and investment needed for market entry.
What is a disadvantage of a joint venture?
Loss of Independence
Decision-making is shared, reducing producer control.
What is the primary function of a broker in wine distribution?
Brokers connect wine producers with potential buyers but do not take ownership of the wine.
What is an advantage of using a broker?
Specialist Market Knowledge
Brokers have access to niche markets (e.g., bulk wine, premium wines).
Fill in the blank: Selling Directly to Consumers (DTC) includes cellar door sales, wine clubs, online sales, and _______.
direct sales at events.
What is a key advantage of DTC sales?
Highest Profit Margins
No intermediary costs.
What is a disadvantage of DTC sales?
High Administrative Costs
Requires staff, logistics, and marketing investment.
What are on-premises sales?
Wine sold in businesses where it is consumed on-site, such as restaurants and bars.
What is an advantage of on-premises sales for producers?
Stronger Brand Exposure
Helps establish reputation, especially in fine dining.
What is a disadvantage of on-premises sales?
Limited Sales Volume
Restaurants and bars buy smaller quantities compared to supermarkets.
What are off-premises sales?
Wine sold in stores where it is taken home for later consumption, such as supermarkets and wine shops.
What is an advantage of off-premises sales for producers?
Larger Sales Volumes
Supermarkets and retailers can move thousands of bottles per year.
What is a disadvantage of off-premises sales?
Lower Profit Margins
Retailers negotiate bulk discounts and charge listing fees.
What are specialized wine retailers known for?
Focusing on premium wines, smaller producers, and niche markets.
What is a key advantage of specialist wine retailers?
Higher Price Points
Consumers are willing to pay more for expert advice and curated selections.
What is a disadvantage of specialist wine retailers?
Lower Sales Volumes
These stores sell fewer bottles than supermarkets.
What is a characteristic of hybrid retailers?
Combining retail sales with a wine bar or tasting room.
What is an advantage of hybrid retailers?
Encourages Exploration
Consumers are more likely to try new wines when they can taste first.
What is a disadvantage of hybrid retailers?
Higher Operational Costs
Running both a retail store and a bar requires more staff and licenses.
What is a key characteristic of online retailing for wine?
Consumers buy wine directly from websites, marketplaces, or subscription models.
What is an advantage of online retailing?
Wider Market Reach
Allows producers to sell globally without geographic limitations.
What is a disadvantage of online retailing?
Shipping Regulations
Some countries and states restrict alcohol delivery.
What is a key feature of global travel retail?
Wine sold in airports, seaports, and international travel hubs.
What is an advantage of global travel retail?
Global Exposure for Brands.
What is a disadvantage of global travel retail?
Expensive Retail Space
High rental costs reduce profit margins.
What type of restaurants are considered destination restaurants?
Fine Dining Restaurants.
What is an advantage of selling wine in restaurants?
Premium Pricing
Wine markups are 2-3 times the retail price.
What is a disadvantage of selling wine in restaurants?
Limited Control Over Sales
Success depends on staff knowledge and recommendations.
What is a significant advantage of selling wine in restaurants?
Premium Pricing – Wine markups are 2-3 times the retail price.
What is a disadvantage of selling wine in restaurants?
Limited Control Over Sales – Success depends on staff knowledge and recommendations.
What is the main focus of Chapter 7?
Wine markets that do not operate under a free-market system.
What is a monopoly market?
A market where the government controls the retail sale of alcohol.
Name an example of a monopoly market.
Sweden: Systembolaget is the only legal retail store for alcohol sales.
What are key characteristics of monopoly markets?
- Government-regulated pricing
- Limited promotional opportunities
- High alcohol taxes
- Strict product selection process
What is a challenge for producers in monopoly markets?
Difficult Market Entry – Approval is lengthy and competitive.
What is an opportunity for producers in monopoly markets?
Stable Market with Reliable Demand – Once listed, wines gain exposure across the entire country.
How does Sweden’s Systembolaget work?
Four times a year, Systembolaget issues tender requests for wines; wineries must register with an approved importer before submitting samples.
What is the USA’s three-tier system?
A system requiring that producers sell to licensed distributors, who then sell to retailers, and retailers sell to consumers.
What is a challenge for producers in the USA’s three-tier system?
Expensive Distribution Costs – Wineries must pay distributors a percentage of sales.
What is an opportunity for producers in the USA’s three-tier system?
Large Market with High Demand – The USA is one of the world’s biggest wine consumers.
True or False: In the USA’s three-tier system, producers can sell directly to consumers in most states.
False
What is a disadvantage of the USA’s three-tier system for small wineries?
Difficult Market Entry for Small Wineries – Distributors prefer to work with larger, well-known brands.
What are the final thoughts on Chapter 7 regarding monopoly markets?
Monopoly markets offer stable demand but have strict regulations.
Fill in the blank: The USA’s three-tier system makes distribution _______.
[challenging]
What is a characteristic of monopoly markets regarding product promotion?
Limited promotional opportunities – Monopoly stores do not advertise brands.
What is a challenge related to compliance in the USA’s three-tier system?
State-by-State Regulations – Each state has different laws, making compliance complex.
